Earnings preview: GE resurgence to continue in 3Q
NEW YORK (AP) — General Electric is expected to show progress on its plan to cut costs and focus on its roots as a manufacturer when it reports earnings for the third quarter on Friday.
Over the last several years, GE has spent billions buying industrial companies such as those that help oil and gas companies find and produce fossil fuels, and manufacturers that make engines and turbines to burn those fuels. At the same time GE has worked to reduce its non-industrial assets by selling NBC, shrinking its banking division and selling commercial real estate holdings.
Now the company promises to push growth at its core industrial businesses, cut costs and keep its cash in-house. A world economy that is growing slower than hoped — and in some cases shrinking — is forcing GE to cut costs fast to protect profits.
The company said at an investors meeting in September that it will have $100 billion in available cash between 2012 and 2016, but it says it is only contemplating relatively small acquisitions. It will use $15 billion to buy its own stock to reduce the number of shares outstanding and increase earnings per share.
The company told its investors that earnings will grow 10 percent for the full year, revising an earlier prediction that earnings would grow 5 to 10 percent.
WHY IT MATTERS: Because of its size and global reach, GE has a unique perspective on the state of economies around the world. Its financial performance is considered a bellwether. GE's industrial operations make and service a range of products; including refrigerators, CT-scanners, wind turbines and engines for jets and trains. GE Capital issues credit cards and provides loans for businesses.
WHAT'S EXPECTED: Analysts expect earnings of 36 cents per share on revenue of $36.95 billion, according to FactSet. GE has said it will recognize a small gain from its partial ownership of NBC, offset by restructuring costs and other charges. Analysts typically exclude those one-time items from their forecasts.
LAST YEAR'S QUARTER: In the same three-month period last year, GE reported net income of $2.34 billion, or 22 cents per share on revenue of $34.81 billion. The quarter was marked by gains from GE Capital that were better than expected, but investors were disappointed that costs were rising and that the company wasn't winning new orders fast enough.